Mortgage Seasoning Requirements | Cash Out Refinance Requirements
Looking for mortgage seasoning requirements? Rate and term, cash out refinance requirements, and bankruptcy and foreclosure seasoning vary by loan program. There are loan programs that have no seasoning requirements.
Delayed Financing – No Waiting Period
There are options with no seasoning requirements when the subject property was purchased within the past six months. You can request information about delayed financing exceptions. The purchase transaction must have been an arms-length transaction.
Fannie Mae Cash Out Seasoning
Fannie Mae cash out seasoning after purchasing a home can vary by lender. If a lender goes by Fannie Mae guidelines, the seasoning requirements are as follows:
You may be eligible for a Fannie Mae cash out refinance with a conventional loan if the property was purchased at least six months prior to the disbursement date of the new mortgage. Exceptions to the mortgage seasoning requirements are:
- If the property was acquired through inheritance or legally awarded, such as separation, divorce, or dissolution of a domestic partnership.
- Proper documentation is needed.
- The six month waiting period can be applied if the property was owned by an LLC that is majority owned or controlled; or
- Owned prior to closing by an inter vivos revocable trust.
Some lenders can have tougher seasoning requirements when it comes to cash out refinances due to not follow Fannie Mae guidelines.
Freddie Mac Cash Out Seasoning
Freddie Mac has similar cash out seasoning requirements to Fannie Mae for conventional loans. If a lender has told you that the seasoning requirements are greater, that is because they have a lender overlay, which is an internal guideline on top of Fannie Mae and Freddie Mac guidelines.
FHA Cash Out Seasoning Requirements
FHA loans allow borrowers to cash out up to 85% loan-to-value for primary residences. They can be easier to qualify for when it comes to credit and capacity than conventional loans. FHA minimum property requirements can be more difficult than conventional appraisal standards.
For FHA cash out seasoning requirements, the property muse be owned and occupied for 12 months. For a rate and term refinance and streamline refinances, requires six months to have passed from the first payment due.
No Seasoning on Investment Properties
There are investment programs that allow borrowers to cash out with no seasoning requirements. Mortgage seasoning requirements often play a factor when it comes to favorable terms. For example, if a property is seasoned for three months, the terms can be more competitive.
These programs allow investors to qualify without personal debt-to-income ratios. The property qualifies based on debt-service ratio also known as a DSR loan.
Bankruptcy and Foreclosure Seasoning
Mortgage bankruptcy waiting periods and foreclosure waiting periods vary depending on the loan program. When following agency guidelines, bankruptcy and foreclosure waiting periods are as follows.
Bankruptcy Mortgage Seasoning Requirements
FHA loans require two years out from the chapter 7 discharge date. You can qualify while in a chapter 13 bankruptcy if:
- You have one year satisfactory payout period on the chapter 13 bankruptcy.
- Written permission from the bankruptcy court.
Some lenders may not allow this because they are not willing to manually underwrite a loan.
For a VA loan, there is a 24 month waiting period from the discharge date. VA guidelines on chapter 13 bankruptcies are similar to FHA loans – 12 months satisfactory payment and court permission.
USDA loans require a three year waiting period for a chapter 7. They do not require a credit exception for plans completed 12 months or greater.
Conventional loans require:
- Four year waiting period after a chapter 7 or 11 bankruptcy.
- Two years for a chapter 13 from the discharge date and four years from the dismissal.
- If you were unable to complete the chapter 13 bankruptcy plan, there is a four year waiting period.
Foreclosure Mortgage Seasoning Requirements
USDA and FHA mortgage seasoning waiting period is three years out for a foreclosure, deed-in lieu, and short sale.
VA loans require two years out from a foreclosure, deed-in lieu, and short sale.
Conventional loans require four years out from a deed-in lieu of foreclosure, short sale, and charge off of mortgage account. A foreclosure has a seven year waiting period. In the case that a foreclosure was discharged in the bankruptcy, the bankruptcy waiting period can be applied if there is appropriate documentation to verify the mortgage was discharged in the bankruptcy.
Loan Program with No Mortgage Seasoning Requirements
There are non-qm loan programs that allow no seasoning on derogatory events such as a short sale, bankruptcy, deed-in lieu, and mortgage charge off. They require a larger down than traditional loans when purchasing, but also allow cash out refinances and rate and term refinances.